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The introduction of a Bitumen Price Index BPI

Resolution of RPF May 2001. That the proposed BPI be monitored and reported to the next RPF. What is a BPI?. a transparent and defendable mechanism of price adjustment irrespective of the agreements negotiated between particular suppliers and their customersdriven largely by global factors

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The introduction of a Bitumen Price Index BPI

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    1. The introduction of a Bitumen Price Index (BPI) Follow-up report

    2. Resolution of RPF May 2001 That the proposed BPI be monitored and reported to the next RPF

    3. What is a BPI? a transparent and defendable mechanism of price adjustment irrespective of the agreements negotiated between particular suppliers and their customers driven largely by global factors does not promote price regulation does not encourage arrangements related to market share

    4. Why a BPI? Demise of a “regulated” WLSP in August 2000 Lack of a creditable datum for adjustment of a product with a price tag linked to global dynamics of crude prices and f.e rates

    5. Advantages of a BPI promotes just and fair practice lends credibility to periodic price adjustments facilitates equitable administration of state contracts

    6. Initial study How did WLSP of bitumen vary compared to the landed cost of related hydrocarbon products Model to simulate the WSLP movements (exc. incentives) during Jan 89 - Jan 01 Proposed method

    7. Correlation MFO (Durban) - WLSP

    8. Effects of local inflation Introduced through factoring FPi = WSLPi-1 [f*MFOi/MFOi-1 + (1-f)*PPIi/PPIi-1)] Tracks a theoretical WLSP with monthly adjustments

    9. Comparison - Actual WLSP and factored prices

    10. WLSP and Factored prices

    11. Conclusions reached Model simulates actual movements in WLSP very well Introduction of local PPI improves the simulation Suitable mechanism for introducing a BPI In the absence of a WLSP there is evidently no other alternative The notion that presentation of invoices of supplier as a means of substantiation of increases is probably naďve That the proposed BPI be monitored and reported to the next RPF

    12. Monitoring process Price movements of relevant products PPI Market quoted prices Testing the model proposed

    13. Tracking price movements Durban Bunkers Price (USD) - daily USD - ZAR exchange rates - daily quoted prices of various producers - date of change Volumes declared PPI from SSA

    14. Parameters determined Durban bunkers prices (DBP) in ZAR Indicator price = WLSPi-1(0.6?DBPi/DBPi-1+ 0.4?PPIi/PPIi-1) Weighted market price

    15. Comparative Price Movements

    16. Price Correlation

    17. Conclusions Historical pattern continues Model has proved to be robust Month-to-month “indicator price” can be published 1 month in arrears Basis of a “recommended retail price” Primary producers are in favour of the scheme

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